Recent Decision Clarifies “Joint” and “Single” Employer Liability

In St. Jean v. Orient-Express Hotels, decided August 7, 2013, the Southern District of New York explained when an entity that is not the plaintiff’s “direct” employer is nevertheless liable for violations of Title VII of the Civil Rights Act of 1964. The court held that plaintiff adequately alleged that the defendant, while not her “direct employer”, may still be liable.

Plaintiff Melissa St. Jean alleged that she was subjected to sexually offensive emails and an unwanted sexual advance (in St. Maarten) by one Richard Seay, and that she was fired after complaining about it.

She sued defendant Orient-Express Hotels Inc. (OEHI), a New York-based subsidiary of non-party Orient-Express Hotels, Ltd.  Alleged harasser Seay was the director of sales at a company called Cupecoy Village Development N.V., which is located in St. Maarten and is another subsidiary of OEH Ltd.

Defendant argued that the complaint should be dismissed since defendant OEHI was not plaintiff’s “employer”.  The court disagreed.

Title VII prohibits discriminatory employment practices by an “employer.”  A “direct employer/employee relationship” is not required to establish liability.  The Second Circuit recognizes 2 exceptions to the rule that discrimination claims may be maintained only against a plaintiff’s direct employer:

  • The “joint employer doctrine”, under which liability may be found when “separate legal entities have chosen to handle certain aspects of their employer-employee relationships jointly.” 
  • The “single employer doctrine”, under which liability may be found “when two nominally separate entities are part of a single integrated enterprise”.

A.  Joint Employer 

The court noted two approaches – the “economic realities” and “immediate control” tests – that have been applied in the Second Circuit to determine the question of joint employment.

It found that plaintiff plausibly alleged “joint employment” liability under either test:

[U]nder either the economic realities or the immediate control test, Plaintiff has alleged facts sufficient to show that OEHI may have jointly employed her along with Cupecoy. Plaintiff has submitted an affidavit naming several Cupecoy employees who reported to OEHI employees. She has alleged that she was required to have daily contact with, and report to, several OEHI employees via email and phone. Plaintiff also maintains that Cupecoy’s major employment decisions, including hiring and termination, and Cupecoy’s marketing, advertising and sales were handled by OEHI employees. For example, Etheridge, the Director of Human Resources for OEHI, allegedly came to Porto Cupecoy to handle Plaintiff’s sexual harassment claims. In addition, Gesue, the Managing Director and Vice President of Global Real Estate for OEHI, allegedly had final authority on Plaintiff’s termination. Thus, considering the the circumstances of the whole activity” and the relevant factors exhibiting control, the Amended Complaint raises issues of fact as to the potentially integrated nature of OEHI and Cupecoy, and how those entities relate to each other and OEH Ltd.

The court noted, however, that “[e]ven where two companies are deemed a joint employer, it is not necessarily the case that both are liable for discriminatory conduct in violation of Title VII.”

Therefore, defendant will be entitled, going forward, an opportunity to prove that “the entities are actually separate or that they should not be liable for Seay’s conduct.”

B.  Single Employer

Title VII:

sets forth four factors to be considered in assessing whether a foreign corporation is “controlled” by an American employer: (1) the interrelation of operations; (2) the common management; (3) the centralized control of labor relations; and (4) common ownership or financial control. … [T]he four factors comprising the single employer doctrine are flexible and that no one factor is determinative. Whether the entities can be joined as a single employer is a question of fact.

Courts applying this test have focused on the third factor-the centralized control of labor relations.  [T]he critical question to be answered then is: What entity made the final decisions regarding employment matters related to the person claiming discrimination? In addition, the Court must focus its inquiry on the parent’s actual involvement in the particular circumstances giving rise to the litigation.

Defendant argued:

Plaintiff’s contentions are conclusory and unsupported because the fact that OEHI employees sometimes traveled to Cupecoy and communicated with Cupecoy employees is insufficient” to withstand a motion to dismiss. Defendant maintains that at no time has OEHI supervised Cupecoy’s day-to-day operations; made Cupecoy’s decision on hiring, discipline, and termination of its employees; received Cupecoy’s employment applications; approved Cupecoy’s personnel status reports; had final authority for all major employment decision for Cupecoy; or, routinely shifted employees between itself and Cupecoy.

The court disagreed, and distinguished the cases defendant cited in support of its argument on the ground that those cases were decided on more complete factual records.  Here, plaintiff had yet to take any discovery.

The court denied defendant’s motion to dismiss, finding that plaintiff’s allegations plausibly suggested that defendant “controlled” Cupecoy:

Here, Plaintiff has alleged facts that suggest that OEHI and Cupecoy may be an integrated enterprise. As discussed above, the centralized control of labor relations is the most important factor and courts focus relevant factors including whether the subsidiary has a separate human resources department, whether the subsidiary establishes its own policies and makes it[s] own decisions as to hiring discipline, and termination of its employees. Plaintiff has alleged that Gesue, a Managing Director and Vice President of OEHI, signed Plaintiff’s termination letter and made certain hiring decisions for Cupecoy, including hiring Seay. She has also alleged that Etheridge, the Director of Human Resources for OEHI, investigated Plaintiff’s claim, interviewed Plaintiff and personally fired Plaintiff. These facts, if true, would certainly demonstrate that OEHI and its employees were involved with the negative employment decision by which Plaintiff allegedly was injured.

A brief examination of the other three, less significant, factors of interrelation of operations, common management and common ownership or financial control also suggest that OEHI may be considered Plaintiff’s employer. While the operations of OEHI and Cupecoy are geographically separate, Plaintiff alleges that certain budget, sales and marketing are handled by OEHI for Cupecoy. In addition, according to Plaintiff, OEHI and Cupecoy shared business records and repeatedly transferred employees, including Etheridge, Armstrong and Gesue, between the two entities. Plaintiff also alleges that when she was out of the office between February 1 and 8, 2012, Armstrong flew into Cupecoy to perform Plaintiff’s job duties in her absence. Thus, there appears to be some factual issues as to whether OEHI and Cupecoy’s operations and management are interrelated.

With regards to ownership and financial control, Plaintiff maintains that OEHI and Cupecoy are both commonly owned subsidiaries of OEHI Ltd. While the entities may have a common corporate parent, this fact, standing alone, is insufficient to establish that the OEHI and Cupecoy are a single employer. However, at this stage of the litigation, additional facts may be obtained through discovery and it is inappropriate to dismiss the claims on this basis.

Taken together, Plaintiff has presented facts that, if true, plausibly demonstrate that Cupecoy may be controlled by OEHI, and that the entities may act as a single employer. As discussed above, as the litigation advances, Defendant may demonstrate that Cupecoy is not a foreign corporation “controlled” by OEHI, the American employer. Plaintiff, however, has pled sufficient facts for the purposes of the instant motion.

If anything, this case illustrates that the facts in every case must be thoroughly explored when determining which of several entities are a Title VII “employer” and hence subject to liability for unlawful employment practices.

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